Interim Results 2006

Shenzhou International Group Holdings Limited

August 2006Stock code: 2313 HK

1

AgendaAgenda

Financial Highlights

Business Review

Strategies and Plans

Open Forum

2

Financial Highlights

3

Financial HighlightsFinancial Highlights

30.2146,439190,593Profit attributable to equity holders

(5.9)16 cents15 centsBasic EPS (RMB cents)

24.1173,285215,082Operating Profit

28.51,081,4931,390,177Turnover

Change (%)1H 20051H 2006(RMB '000)Six months ended 30 June

4

Sustainable Turnover Sustainable Turnover and Net Income Growthand Net Income Growth

2005 2006 2005 2006

1,081.5146.4

Turnover Net Profit

+28.5%

+30.2%

Strong growth in turnover was attributable to:– Strong demand from Japan– Rising sales of sports wear– Development of Europe market

Six months ended 30 June Six months ended 30 June

1,390.2190.6

RMB Mn RMB Mn

5

Profit Margin AnalysisProfit Margin Analysis

Gross Profit Margin Net Profit Margin

2005 2006 2005 2006

24.0%22.4%

13.5%

13.7%

Gross profit margin slightly decreased was attributable to the increase in recruiting new labour, which is in the training stage, to handle the upcoming orders

Six months ended 30 June Six months ended 30 June

6

Turnover Breakdown by ProductsTurnover Breakdown by Products

28.5%308,684100%1,081,493100%1,390,177Total

(18.2%)(13,266)6.7%72,7614.3%59,495Other knitting products

150.5%110,0526.8%73,11613.2%183,168Sports wear

22.6%211,89886.5%935,61682.5%1,147,514Casual wear

By products

%RMB'000%RMB'000%RMB'000Change20052006

Six months ended 30 June

Sales of sports wear and casual wear up 150.5% and 22.6% respectively

Strong order books from Uniqlo, Nike, Adidas and Puma, etc

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Turnover Breakdown by RegionsTurnover Breakdown by Regions

37.3%18,2674.5%48,9884.8%67,255Domestic Market

28.5%308,684100%1,081,493100%1,390,177Total

437.3%40,0680.9%9,1623.6%49,230Rest of World

(17.5%)(7,451)3.9%42,4802.5%35,029United States

163.8%99,6015.6%60,80311.5%160,404Europe

17.2%158,19985.1%920,06077.6%1,078,259Japan

%RMB'000%RMB'000%RMB'000

Change20052006

Six months ended 30 June

Stable increase in orders from Japan

Promising development in Europe market

Increase in the demand of the rest of world was attributable to the orders from Nike and Puma to Australia, Korea and South Africa, etc

Surge in domestic market demand from Nike, Uniqlo and Itochu, etc

8

Healthy Financial PositionHealthy Financial Position

For the six months ended 30 June,

422673

2006

32Creditor turnover days21Debtor turnover days62Inventory turnover days

2005

30 June31 December

391560Cash and Cash Equivalent(RMB Mn)

2,770

1,866

23.2%

2006

32.8%Gearing ratio(debt to equity) (%)

2,540Total assets (RMB Mn)

1,702Net assets (RMB Mn)

2005

9

Use of ProceedsUse of Proceeds

Acquisition of new dyeing and finishing equipment for the Group’s China production facilities

Acquisition of new weaving and knitting equipment for the Group’s China production facilities

Acquisition of new cutting and sewing equipment for the Group’s China production facilities

Repayment of long-term bank borrowings

General working capital

Acquisition of new plant and equipment for the production of functional fabrics mainly used in sports wear

PlannedActual

47.8 199

26.2 183

39.6 70

51 51

305 305

48 48

Unit: HK million

10

Business Review

11

Six months ended 30 June

For the year ended 31 December

20062005200520042003

45,441

30,414

21,663

18,240

38,365

17,907

16,394

13,980

77,699

30,966

38,003

30,782

68,18063,720Cutting and sewing(in thousand pieces of apparel)

37,91933,768Printing and embroidery(in thousand pieces of fabric)

33,58033,870Dyeing and finishing(in tons)

25,69026,360Weaving and knitting(in tons)

Expand production facilities

Higher economies of scale and lower fixed production unit cost

Optimize workflow and utilization of facilities

Higher operating efficiency and higher production volume

High Economies of Scale andHigh Economies of Scale andOperating EfficiencyOperating Efficiency

12

Owned a waste water treatment plant with processing capacity of approx. 60,000 tons per day

Current usage is 40,000 tons per day

Treatment plant reached the level 1 wastage standard and is under the monitor of the environmental protection bureau

Total land use is 1,000 acreages, of which more than 800 acreages were owned by the Company

Newly acquired 100 acreages

Abundant Utilities SupplyAbundant Utilities Supply

Fulfill environmental standards

Stable supply to ensure smooth operation

WaterWater WasteWasteWaterWater

LandLand

In July 2006, water price up from RMB2.25/m3 to RMB3.5/m3

Entered into an agreement with the government to secure water supply of at least 20,000 m3 per day for a term of 20 years, commence from 2007 at a unit price of RMB0.51/m3.

Consolidated water price will change to approx. RMB2/m3 in 2007

Stable supply from Ningbo Thermal Power Co, Ltd

In July 2006, price adjusted from RMB0.65/u to RMB0.675/u

50% of steam supplied from thermal plant.

Electricity & Steam

13

Ample Ample LabourLabour SupplySupply

No. of staff increased approx. 6,000 to near 28,000 to handle the upcoming orders from Nike, Adidas and Puma, etc.

Provide various welfare benefits to create harmonious living environment for workers

Cost of labour increased from 17.4% to over 18.8% of total production cost

Lower the percentage of cost of labour to total production cost by increasing production efficiency

14

Production Base in CambodiaProduction Base in Cambodia

Undertake cutting and sewing manufacturing operations with production capacity about 500,000 pieces per month

Production base was certified by Uniqlo, Nike, Adidas and Puma

Acted as another production base for Uniqlo

Diversified production base to ensure safety supply to international customers

Ningbo

CambodiaSupply of fabric

15

Established business relationships from 6 to 14 years with Japanese customersIncreased contract amount from existing clients (e.g. Nike, Adidas and Puma)

Strong Clientele in Japan and the WorldStrong Clientele in Japan and the World

Apparel sourcing agents

Knitwear and sports wear international brand owners

Sojitz Holdings CorporationItochu CorporationTatsumi Trading Co., LtdChori Co., Ltd

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Strategies and Plans

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Expanding Revenue Sources and Expanding Revenue Sources and Enhance ProfitabilityEnhance Profitability

Strong growing demandof sports wear driven by

2008 Olympics

Strategies:

Increase sports wear sales

Diversify product range through further expansion of underwear and home wear products

Strengthen customer relationships with international renowned brand

Plans:

Acquisition of more specialized equipments

Strengthen fabric and garment design team

Expansion of production capability

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Enhance Production Efficiency and Enhance Production Efficiency and Stringent Cost ControlStringent Cost Control

Better production planning

Enhance operating efficiency

Computerized cutting

Increase cutting rate

Enhance production efficiency

Stringent cost control

Upgrade dyeing facilities

Improve dyeing process

Lower cost of dyeing

Increase output ratio

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Expanding into New Geographical MarketsExpanding into New Geographical Markets

Leverage on its strong customer network in Japan, the Group intends to expand its market coverage in Asia, Europe and US

Establish strategic partnership by locating specialised production area to different clients

Europe

Asia

US

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MissionMission

To Be

The Most Competitive

Knitwear Manufacturer

In the World